Stars are blind

The Middle East has seen a recent influx of budget hotels springing up to take advantage of a clear gap in the market. According to these new players, traditional star ratings are fast losing significance, with brand recognition and value for money driving consumer choice in the new economy.

No-frills, budget, economy, limited service - ever-tightening belts across the world have increased the demand for low-cost options in a market that is currently overflowing with five-star hotels.

Instead of the latest designer hotel brands and ultra-luxe resorts, the names on everyone's lips lately are Premier Inn, Ibis, Holiday Inn Express, Centro by Rotana and a host of other budget hotel concepts.

These operators agree that the Middle East has been dominated by an unsustainable level of opulence for too long and is now mature enough to recognise the need for mid-range and low-cost options.

However, while the gap in the market is undeniable and consumer demand is strong, several challenges face the burgeoning budget hotel industry in the Middle East.

For most hoteliers, classification disputes and the danger of oversupply top the list of concerns.

The vast disparity in rating systems across the Middle East is perhaps most apparent in the budget sector; IHG's Holiday Inn Express hotel was given a two-star rating in Dubai, yet the same standard rooms managed to warrant a four-star rating in Bahrain.

EasyHotel founder and "serial entrepreneur" Stelios Haji-Ioannou freely admits that his planned expansion plans into the Middle East have faced severe delays and ever-increasing costs because of regulatory constraints.

He says the company has been forced to add extra amenities to its usual no-frills, "superbudget" rooms, after prolonged battles with local authorities.

Haji-Ioannou's argument, that consumers should judge what is necessary and vote with their wallets, is echoed by Premier Inn managing director Darroch Crawford.

"EasyHotels have a very small room [size] - by their own description - and they find that they are not able to deliver the same product that they are delivering elsewhere in the world, which has added considerably to their costs," says Crawford.

"I think we, as operators, should be able to deliver a similar product throughout the world and let the customers decide if that product is acceptable or not."

Premier Inn has a three-star rating in Dubai, based largely on the fact that its hotels offer both a bathtub and shower in each room.

However, Crawford explains that the brand is deliberately un-rated in the UK and prefers to downplay its three-star rating.

"Star ratings are a throwback to days when it was difficult for people to have any idea of what they were buying," he says.

"With modern technology, it is possible through the internet to know exactly what you're buying and I think that's what people rely on now, rather than stars."

Ibis Al Barsha general manager Philippe Montaubin represents another hotel that has shrugged off its star rating.

"We don't consider ourselves as a two-star; we name ourselves an ‘economy hotel'," he says.

"This is simply a value-for-money property offering great service in an ideal location."

The recently-opened Ibis Al Barsha is a 480-room hotel on Sheikh Zayed Road.

Montaubin explains that despite its budget price-tag, the hotel strives to remain up-to-date with its contemporary clientele.

All rooms are wifi-enabled and are equipped with IDD telephones, flat-screen televisions and a plug-and-play device for music players and other electronic accessories.

"It is not a high-tech hotel, but we still have to be in line with what is happening in today's world," Montaubin explains.

IHG vice president for development in the Middle East and Africa Phil Kasselis says that budget hotels in the region have a unique opportunity to offer value for money in a contemporary setting.

"The beauty of this market is that all of our developments are new-builds, so effectively you are creating a new product, which hasn't been compromised by having to retrofit an existing building; you're launching a clean brand," he says.

"Accordingly, people are pleasantly surprised."

The Holiday Inn Express brand (part of IHG) is currently in the middle of a global re-launch initiative, focusing on consistency, quality and a more contemporary brand identity. It is expected to be completed by the end of 2010.

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